Eaton is one of the leaders in this segment and this is a nicely written deep dive with a lot to take in. I agree with the analysis that Eaton is trading at an expensive valuation and will need outsized growth to justify this stock price. However, I think this is the same for the other US based competitors highlighted also like Vertiv. Also, for a more accurate comparison of industry peers Siemens Energy needs to be replaced by Siemens AG as it is the latter that competes directly with Eaton and not the former as both, the electrification and automation business of Siemens is housed in Siemens AG and not Siemens Energy. Would be interested in getting your thoughts on how Siemens AG stacks up to Eaton as in my opinion Siemens is performing extremely well and doesn’t carry as high a valuation as Eaton and has more room to grow.
That's a really good point on comparing Siemens AG. I did consider that, but the issue I had is that Siemens AG is an industrial goliath and also has so many other arms (for example, its Product Lifecycle Management solution, Teamcenter, and its simulation suite, not to mention Healthineers, HVAC or finance arms), that I didn't think it would be a fair comparison. To be honest, the same is somewhat true of Schneider, which has various software and products related to building management services that Eaton doesn't offer, but Schneider is a more obvious direct competitor.
If you look at the Siemens Energy portfolio, you will see it sells the circuit breakers, switches, HV components, etc., which is why I picked them as the comparator over Siemens AG. But they also produce gas and wind turbines, which clearly don't feature in the Eaton portfolio - so there is no very clear answer here as to which is best to compare.
Siemens AG is a company that I would like to research in the future - if I were looking to expand my portfolio, it would be one of the companies I would be interested to add. But it's not a company I have enough of an opinion on to add currently.
With respect to the valuation - I think it's telling how rapidly the P/E has expanded in the industry. You are right that many companies in this space are trading at rich valuations currently. But that just means there is a lot of sustained future growth already priced in to the industry, not that any specific company intrinsically warrants its current price. Maybe they do, if you believe the future growth can be achieved, or thst the expanded P/E multiple is here to stay.
Eaton is one of the leaders in this segment and this is a nicely written deep dive with a lot to take in. I agree with the analysis that Eaton is trading at an expensive valuation and will need outsized growth to justify this stock price. However, I think this is the same for the other US based competitors highlighted also like Vertiv. Also, for a more accurate comparison of industry peers Siemens Energy needs to be replaced by Siemens AG as it is the latter that competes directly with Eaton and not the former as both, the electrification and automation business of Siemens is housed in Siemens AG and not Siemens Energy. Would be interested in getting your thoughts on how Siemens AG stacks up to Eaton as in my opinion Siemens is performing extremely well and doesn’t carry as high a valuation as Eaton and has more room to grow.
That's a really good point on comparing Siemens AG. I did consider that, but the issue I had is that Siemens AG is an industrial goliath and also has so many other arms (for example, its Product Lifecycle Management solution, Teamcenter, and its simulation suite, not to mention Healthineers, HVAC or finance arms), that I didn't think it would be a fair comparison. To be honest, the same is somewhat true of Schneider, which has various software and products related to building management services that Eaton doesn't offer, but Schneider is a more obvious direct competitor.
If you look at the Siemens Energy portfolio, you will see it sells the circuit breakers, switches, HV components, etc., which is why I picked them as the comparator over Siemens AG. But they also produce gas and wind turbines, which clearly don't feature in the Eaton portfolio - so there is no very clear answer here as to which is best to compare.
Siemens AG is a company that I would like to research in the future - if I were looking to expand my portfolio, it would be one of the companies I would be interested to add. But it's not a company I have enough of an opinion on to add currently.
With respect to the valuation - I think it's telling how rapidly the P/E has expanded in the industry. You are right that many companies in this space are trading at rich valuations currently. But that just means there is a lot of sustained future growth already priced in to the industry, not that any specific company intrinsically warrants its current price. Maybe they do, if you believe the future growth can be achieved, or thst the expanded P/E multiple is here to stay.